Business Finance Homework Help

Questions:

Q1. Identify the key financial decisions facing the financial manager of any business firm and Explain the meaning of each decision? (1 mark)

Q2. What can happen if a firm is poorly managed? (1 mark)

Q3. If the expected inflation rate is 10 percent and the real rate of interest is 4 percent:

1. Compute the nominal rate of interest. (Hint: use equation 2.1) (0.5 mark)
2. Briefly differentiate between the nominal and the real rates of interest. (0.5 mark)

Q4. Nimitz Rental Company provided the following information to its auditors. For the year ended March 31, 2011, the company had revenues of $878,412, general and administrative expenses of $352,666, depreciation expenses of $131,455, leasing expenses of $108,195, and interest expenses equal to $78,122. 

If the company’s tax rate was 34 percent, what is its net income after taxes? (1 mark)

Q5. Modern Appliances Corporation has reported its financial results for the year ended December 31, 2011.

   

Modern Appliances Corporation

       

Income Statement for the Fiscal

31-Dec-11

 

Sales 

 5,398,412,000 

 

Cost of goods sold 

 3,432,925,255 

 

Gross profit margin 

 1,965,486,745 

 

Selling, general, and admin. expenses

 1,036,311,231 

 

Depreciation

    299,928,155 

 

Operating income

    629,247,359 

 

Interest expense

      35,826,000 

 

EBT

    593,421,359 

 

Income taxes

    163,104,554 

 

Net earnings

    430,316,805 

Consolidated Balance Sheet

Modern Appliances Corporation

Balance Sheet as of December 31, 2011

Assets 

Liabilities and Stockholders’ Equity 

Cash and cash equivalents 

$ 514,412,159 

Short-term borrowing 

$ 117,109,865 

Accounts receivable 

1,046,612,233 

Trade accounts payable 

466,937,985 

Inventories 

981,870,990 

Other current liabilities 

994,289,383 

Other current assets 

313,621,610 

Total current assets 

$2,856,516,992 

Total current liabilities 

$1,578,337,233 

Net fixed assets 

754,660,275 

Long-term debt 

1,200,691,565 

Total liabilities

$2,779,028,798

Goodwill 

118,407,710 

Common stock 

397,407,352 

Other assets 

665,058,761 

Retained earnings 

1,218,207,588 

Total equity

1,615,614,940

Total assets 

$4,394,643,738 

Total liabilities and stockholders’ equity 

$4,394,643,738 

Using the information from the financial statements, complete a comprehensive ratio analysis for Modern Appliances Corporation.

a. Calculate these liquidity ratios: current and quick ratios. (0.2 mark)

b. Calculate these efficiency ratios: inventory turnover, total asset turnover. (0.2 mark)

d. Calculate these leverage ratios: total debt ratio, debt-to-equity ratio, Equity multiplier. (0.2 mark)

e. Calculate these profitability ratios: gross profit margin, net profit margin, ROA, ROE. (0.2 mark)

f. Use the DuPont identity, and after calculating the component ratios, compute the ROE for this firm. (0.2 mark)